Regulation
Too few jurisdictions follow virtual asset guidelines, says FATF
A recent report reveals that the majority of jurisdictions worldwide have only partially complied with the Financial Action Task Force (FATF) recommendations for the regulation of virtual assets.
Some progress has been made, but not enough, according to a report published on July 13. Further efforts are needed to fully adhere to the FATF recommendations and establish a coherent global strategy for the regulation of virtual assets.
According to the study:
- 58% of jurisdictions have introduced different levels of regulation for virtual asset service providers (VASPs)
- Only 42% have fully implemented the FATF “travel rule”, which requires the exchange of customer information between VASPs.
Significant deficiencies persist in areas such as the supervision and monitoring of VASPs, the FATF said.
Who complies?
Jurisdictions with the highest levels of compliance generally have well-established financial sectors and strong anti-money laundering frameworks.
Developing countries, however, face greater difficulties in implementation.
The report highlights the critical role of continued international cooperation and information sharing in addressing these gaps and maintaining the security and resilience of the virtual asset ecosystem as financial crime threats continue to increase.
Furthermore, the report highlights that despite some progress, further efforts are needed to fully implement the FATF Guidance and achieve a globally coordinated approach to regulating virtual assets.
Contrasts between cryptocurrency regulation in the US and the UK
As the global cryptocurrency market evolves, regulators in the United States and the United Kingdom have taken divergent approaches to bringing the industry into compliance.
In the United States, the regulatory The landscape is characterized by a patchwork of rules, with various federal agencies asserting jurisdiction over different aspects of the crypto industry.
The Securities and Exchange Commission (SEC) has taken a tough stance, classifying many cryptocurrencies as securities and aggressively pursuing non-compliant companies. At the same time, the Commodity Futures Trading Commission (CFTC) has taken a more permissive “do no harm” approach, allowing trading in crypto derivatives.
To further complicate matters, individual US states have imposed their own licensing and regulatory requirements on crypto businesses, contributing to a fragmented compliance environment.
On January 10, the U.S. Securities and Exchange Commission (SEC) made an important statement announcementgranting certain bitcoins the same status as exchange-traded products (ETPs). This historic approval recognizes the real value of cryptocurrencies, paving the way for more digital assets to be integrated into the mainstream economy. Additionally, it underscored the SEC’s commitment to strengthening regulation of the cryptocurrency industry, a move that is expected to influence U.S. regulatory and compliance frameworks going forward.
While the US has taken a stricter stance on cryptocurrency regulation, the UK has adopted a more collaborative model in its efforts to bring the sector into compliance.
In the UK, a key regulatory strategy involves the Implementation of the Financial Conduct Authority’s (FCA) “travel rule”. This rule aligns with global anti-money laundering standards set by the FATF, requiring cryptocurrency businesses to share customer information when transferring funds.
Implementing the UK Travel Rule is essential to combat financial crimes such as money laundering in the cryptocurrency sector. Aligning regulations with international standards will promote a safer environment for crypto transactions.
Furthermore, Initiatives The Bank of England’s efforts on stablecoin frameworks, for example, further underscore the UK’s commitment to integrating cryptocurrencies into the broader financial system.
By adopting a collaborative regulatory approach, the UK seeks to establish itself as a leading global centre for cryptocurrency and blockchain innovation.
As the US and UK navigate a maturing cryptocurrency market, they must strike a balance between supporting innovation and managing potential risks.